This article is part of an ongoing series covering violations of real estate law. Here, a licensed real estate broker violated both California Real Estate Law and the federal Sherman Antitrust Act by engaging in a practice of bid rigging.

In June, the California Department of Real Estate (DRE) revoked the real estate broker license of Raymond Alfred Grinsell. Grinsell had been a licensed broker since 1974, and had never before been disciplined by the DRE.

The DRE (along with the US Justice Department) alleges that Grinsell, in cooperation with multiple other participants, conspired to deter competition for properties at public foreclosure auctions in San Mateo and San Francisco Counties.

Grinsell and the other participants in the scheme arranged the auctions by peremptorily deciding who would win, artificially lowering the prices of the properties.

According to Grinsell, he had not engaged in any bid rigging activities prior to 2008, and was pressured into participating by fellow licensees. Grinsell first learned he was under suspicion in 2011, when the Federal Bureau of Investigation (FBI) notified him he was under investigation. Thereafter, Grinsell alleges he did not participate in any unlawful activities.

In May 2018, Grinsell pled guilty to violations of the Sherman Antitrust Act, and was sentenced to three years’ probation — scheduled to come to an end in May 2021. The federal court also left him with fines and restitution payments totaling nearly $1.6 million.

However, as of June 2019, Grinsell had yet to be formally disciplined by the DRE. He objected to harsh disciplinary measures, arguing his business, Founders Realty, depended on his licensure, and furthermore that he had been pressured into the bid rigging scheme over his better instincts.

In the DRE’s official case write-up, the Department responded, “[Grinsell] seems to argue that his crimes are mitigated by…emotional factors which, he feels, led him to participate in the conspiracies. If that is his argument, it is unconvincing.”

Ultimately, the DRE revoked Grinsell’s license.

The deal with bid rigging

When nonjudicial foreclosure sales (aka trustee’s sales) go according to plan, a notice of trustee’s sale (NOTS) is recorded at least three months after a notice of default (NOD) hits the property, ensuring the sale is public. The auction that takes place afterward is typically conducted by the trustee to foreclose the property and pay off the mortgage balance.

Here, through a practice known as bid suppression, in which participants in the scheme refrain from bidding so that a predetermined bidder will come away with the property, Grinsell and his conspirators artificially drove down the prices of these properties, letting the affected mortgage holders bear the cost.

Bid rigging is not only a violation of California real estate law — it is also a violation of federal law, a felony that can earn far worse punishment than Grinsell received here. Not only does the practice harm mortgage holders (and often other bidders, in cases wherein the price is artificially raised), it also stifles competition, leaving legitimate buyers and sellers out to dry. In other words, bid rigging is a felony for a reason.